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May 31, 2009

668,000 in debt per household

according to this article in USA Today on the exploding US debt. Something has to give, it is not sustainable in the long run. What are the Government's choices? Default or debase the currency?

Tax and cut spending is not going to be politically practical. At some point, other nations stop funding our debt. We will get cut off from our credit lines. The world will start foreclosure proceedings.

Unfortunately, Obama seems to be exacerbating the problem. Deflation would make the debt even more costly. There is only one real option and it is bad for Seniors and young people: Create inflation by printing money. We see the US dollar go hit hard this week. This makes our goods cheaper compared to the rest of the world. It is actually a good thing for our economy. Except, no other nations want to see the US dollar go low so what will they do? Try to weaken their dollar.

It almost becomes a game of who will weaken currencies more. Also, there is now talk the consumer is saving too much and not spending enough. Crazy, right? How will the Fed get consumers to stop saving? Create inflation.

The sound you hear in the background is the global printing press. Paper currencies are being undermined by the second. Hard currencies, gold, real estate are the three hedges people will need.

Right now, the inflation switch is not turned on. But when it comes, the power that is unleashed is going to be a surge like we have not seen in 30 years. How else can we undo 668,000 in household debt?

The people I am most worried for are Seniors who are on fixed incomes. Those who have fixed annuities and think they are safe are going to be very hurt. I am sure they will get a bail out from the Government, but their quality of life will be diminished.